Sunday, 26 Jun 2022

Trillion-dollar crypto collapse sparks flurry of US lawsuits – who’s to blame?

Trillion-dollar crypto collapse sparks flurry of US lawsuits – who’s to blame?


Trillion-dollar crypto collapse sparks flurry of US lawsuits – who’s to blame?

With investors worldwide looking at a collective $1.5tn in recent cryptocurrency losses, a blizzard of class-action lawsuits are being prepared. One big question is: who, if anyone, is to blame - and who could be held to account?

With inflation and interest rates rising, the best-known cryptocurrencies have been hit with heavy and continuing losses: Bitcoin has lost more than 50% of its value this year; Ethereum, its largest rival, is down 65%; and the total value of crypto assets has dropped to less than $1tn from its November 2021 peak of $3tn. US federal regulators say 46,000 people have reported losing $1bn in crypto to scams since January 2021.

Given the millions poured into promoting crypto - often with celebrity endorsements - legal action after the crash was inevitable. Class-action lawsuits are already in the works. Kim Kardashian and the boxer Floyd "Money" Mayweather Jr are being sued for alleged false statements promoting the minor cryptocurrency EthereumMax.

The lawsuit alleges they encouraged followers to join "the EthereumMax community" and that the token itself was a "pump-and-dump" scheme that deceived investors.

EthereumMax has described the legal claim as a "deceptive narrative".

Kardashian and Mayweather were hardly the only celebrities to pitch for crypto. In October last year - at the market's height, when bitcoin had a market cap of $1.14tn - the actor Matt Damon made his debut as the Crypto.com pitchman, advising viewers that "fortune favors the brave". The ad was seen as a turning point for crypto - a financial investment backed by a Hollywood A-lister.

Other digital assets are also under scrutiny. Earlier this month, the justice department charged Nathaniel Chastain, a former employee with NFT marketplace OpenSea, with wire fraud and money laundering in connection with a scheme to trade NFT [non-fungible tokens] assets.

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